In a report on the transition strategies of European oil and gas firms, the financial ratings agency Fitch has said that among the various candidates, BP and Shell seem to be best positioned to successfully navigate through the energy transition.
The report said the two companies have an advantage over competitors like Eni and Total because of a more optimal mix of renewable power, fuel retail outlets and natural gas in their product lines. In the report, Fitch also said:
“We currently view the most favourable products or business lines to be renewable power generation, natural gas production, LNG production and trading, and retail franchises, due to their more robust fundamental demand drivers.”
Both firms also have extensive lubricant businesses, with BP using the Castrol brand to supply everything from metalworking fluids to food safe lubricants. These will still be needed in the future, and even electric vehicles will require lubricants and other fluids.
Fitch also thinks the firms’ heavy involvement in natural gas production will benefit them financially, as it sees gas still being used as a bridge fuel even after peaks in petroleum demand. It also points out that both firms have extensive retail networks, with Shell having 45,000 fuel stations and BP having 18,900 in 2019. Fitch says this offers opportunities for the companies to gradually repurpose their retail outlets to supply hydrogen fuel and charging services for electric vehicles in response to growing demand.
The financial ratings agency also cautions, however, that the firms’ transformation strategies still incur significant execution risks.